The Colour of Magic by Terry Pratchett is a humorous epic adventure. It takes place in the fantastical realm of Discworld, a flat, round land in an alternate universe. Discworld is held up by four elephants that ride on the back of Great A'Tuin, a giant turtle that swims through the cosmos.

Ankh-Morpork, the oldest city in Discworld, is on fire. Rincewind, a local wizard, and Twoflower, a visitor to the area, ride away from the city and meet Bravd and Weasel, two local warriors. In an extended flashback, Rincewind tells the warriors the story of how he and Twoflower met. Twoflower and his magical walking suitcase, known as the Luggage, arrive by boat in Morpork. A blind beggar takes them to the Broken Drum, a tavern frequented by thieves and barbarians. Rincewind is enjoying a beer at the tavern when he meets Twoflower and helps him communicate with Broadman, the owner of the Broken Drum. Twoflower, a clerk from Bes Palargic in the Agatean Empire, has saved up a lot of money to see the sights of Discworld. He pays Rincewind a hefty sum in solid gold coins to be his travel guide.

Rincewind attempts to run off with his advanced pay, but is detained by the town leader, the Patrician of Ankh-Morpork. The Patrician threatens to kill Rincewind if he does not fulfill his duties as Twoflower's guide, so Rincewind reluctantly returns to the tavern. He heads upstairs to collect Twoflower, who has been sleeping while a fight rages downstairs. Excited to hear about a real barroom brawl, Twoflower unpacks his black picture box and takes several pictures of the scene. Ymor and Withel, local thieves, hear of Twoflower's vast supply of gold coins and decide to rob him. While Rincewind and Twoflower are touring the city, Twoflower disappears and Rincewind runs into Withel. Rincewind escapes and tries to jump into the river, but the Luggage holds him back until he agrees to find Twoflower. Back at the Broken Drum, Twoflower convinces Broadman to buy an inn-sewer-ants polly-sea from him in order to protect the owner's interests in the tavern. Ymor and Withel stand guard nearby, waiting for Rincewind to return with the Luggage. Rincewind and the Luggage storm the tavern, using coin-filled bags as grenades. He rescues Twoflower from the rafters while the Luggage attacks the ruffians, who run away in fear. As they leave, the Broken Drum bursts into flames, for Broadman has set it on fire. Withel attacks Rincewind and begins to choke him. Twoflower and Rincewind work together to escape Withel and leave the city. Much to Rincewind's disgust, Twoflower reveals that Broadman had just paid the first inn-sewer-ants premium on the tavern.

On the way to Chirm, Rincewind and Twoflower encounter an angry troll, which has been sent by one of the gods to thwart their progress. In the ensuing chaos, the men are separated in the surrounding woods. Rincewind climbs a tree to escape a pack of wolves and is captured by the tree's dryads in retaliation for the damage he causes to their tree. The dryad's leader, Druellae, informs Rincewind that Twoflower has wound up at the Temple of Bel-Shamharoth, an abandoned building dedicated to the worship of a hideous tentacled creature known as the Sender of Eight. Using the old magic that is forbidden for use by wizards, the dryads perform a ritual to observe Twoflower's encounter with the Sender of Eight. While watching Twoflower from a shaft of magical octarine light, Rincewind notices that Hrun the Barbarian, a hero of Discworld, is also at the temple. Hrun has spotted the gold inside the Luggage and plans to steal it. He has followed the Luggage to the temple, unaware of the Luggage's loyalty to Twoflower. While the dryads are distracted by the vision, Rincewind escapes by running into the shaft of light and is magically transported to the temple. He begs Twoflower and Hrun not to say the number between seven and nine. When Kring, Hrun's magical talking sword, utters the number eight while in the temple, the multi-tentacled, one-eyed Sender of Eight appears and attacks the three men. During the scuffle, Rincewind picks up Twoflower's picture box and wields it at the beast. A bright flash from the box's light attachment of octarine-filled salamanders upsets the creature so much that it slithers away. The temple succumbs to the ravages of time and crumbles as the men escape.

Rincewind, Twoflower, and Hrun head to Quirm. Along the way they stop near the Wyrmberg, a magical mountain community. The citizens of the Wyrmberg use the magic to summon dragons, which they use as protection. Liessa, daughter of the Lord of the Wyrmberg and rightful heir, sends several dragons to capture the three travelers. As they flee from Liessa's dragons, Rincewind, Twoflower, and Hrun are separated. Rincewind is knocked from his horse and wakes up to find that Twoflower and Hrun have been captured. Kring, Hrun's magical sword, promises to help Rincewind rescue his companions. The wizard and the sword encounter K!sdra, a dragonrider from the Wyrmberg, who has been assigned to kill Rincewind. With Kring's help, Rincewind attacks K!sdra, who says he will reunite the wizard with his friends at the Wyrmberg. Upon arriving at the Wyrmberg, Rincewind discovers he is expected to surrender, which he refuses. Assuming that Rincewind has come to fight, Lio!rt, Liessa's brother, challenges the wizard to mortal combat while hanging from the ceiling of the dragon's roost. Rincewind fights bravely with Kring's help, cutting Lio!rt on his chest. When a ceiling hook breaks during the battle, Rincewind ends up dangling from the ceiling.

Meanwhile, Twoflower and Hrun are imprisoned in the Wyrmberg dungeon, awaiting their fate. Liessa comes to see Hrun and tells him that she needs a warrior to perform three tasks for her. If Hrun can fulfill all three tasks, she will marry him and he will become Lord of the Wyrmberg. The first task is killing her brothers, who also seek to rule the Wyrmberg. While Liessa is preoccupied with Hrun, Twoflower is taken to another cell. He sits fantasizing about dragons, then realizes he is not alone. Much to his surprise, Twoflower discovers that his childhood fantasies have combined with the Wyrmberg's magic to call forth a dragon, which he names Ninereeds. The dragon helps him escape, and the pair wind up meeting Greicha, the dead Lord of the Wyrmberg. No longer restricted by time and space, Greicha is able to tell Twoflower that he will rescue Rincewind. Twoflower mounts Ninereeds and they fly off to find Rincewind. They catch Rincewind just as he is falling from the cavern ceiling.

Hrun follows Liessa's orders and challenges her brothers, Lio!rt and Liartes, to mortal combat. The brothers choose to fight with dragons, much to Hrun's dismay. An unarmed Hrun manages to defeat both brothers by knocking them out cold, which effectively kills their imagination-fueled dragons. Despite Liessa's instructions, Hrun refuses to kill the men, saying it is unfair to kill someone who is unconscious. Liessa presents Hrun's final test by removing her clothes. As the couple enjoys a cup of wine, Ninereeds dives in and grabs Hrun, who is none too pleased about leaving Liessa. As the dragon soars higher, the air thins and Twoflower passes out. Ninereeds disappears and Liessa swoops in on her dragon and snatches Hrun.

Rincewind, Twoflower, and the Luggage tumble into the Circle Sea and are rescued by a slave ship. The men escape from the ship in a small boat and get caught in the current near the Rimfall, the Edge of Discworld. Tethis, a sea troll that patrols the area, finds Rincewind and Twoflower trapped in the Circumfence, a system of ropes and pulleys that marks the Edge. He takes them into his shack at the Edge and offers them a place to stay until a salvage fleet arrives. Afraid he might be sold into slavery, Rincewind attacks Tethis to no avail. A lens-shaped flyer powered by water-hating wizards arrives to take Rincewind and Twoflower to Krull, a nearby kingdom. The lens is commanded by Marchesa, a fifth-level wizard well aware of Rincewind's lack of magical skills but still in awe of his ability to survive. Upon docking in Krull, Twoflower and Rincewind are taken to their prison cell, an ornate room full of local delicacies. Garhartra, the Guestmaster, greets the men and says their stay will be comfortable, but short, as they are to be sacrificed. Rincewind attempts to attack Garhartra with a bottle of wine but the Guestmaster uses his magic to pin Rincewind against the wall.

After Garhartra leaves, Rincewind and Twoflower discover that the frog they rescued at the Edge is actually the Lady, a Discworld goddess. She tells them that their sacrifice is supposed to ensure the safety of the Potent Voyager, a spaceship that will be launched that day. When Garhartra returns to collect Rincewind and Twoflower, the enchanted bottle breaks on his head and the men flee. They find a room containing uniforms for the Potent Voyager chelonauts, who show up unexpectedly. Rincewind and Twoflower knock the chelonauts out cold and put on the uniforms. At the launch, the Arch-astronomer of Krull learns that Rincewind and Twoflower have escaped. When Rincewind and Twoflower arrive at the launch disguised as the chelonauts, the Arch-astronomer suspects something is wrong and prepares to attack.

Before he can do so, the Luggage enters the arena, having wreaked havoc all over the Edge in its quest for Twoflower. The Krullian magicians cast many spells on the Luggage, only angering it further. From his perch on the launch pad with Rincewind, Twoflower calls to the Luggage and discovers that Tethis is inside the chest. Soldiers advance on the men, and Tethis and Twoflower climb inside the ship to escape. As the Krullians get closer, the Potent Voyager is jostled and the hatch closes, trapping Tethis and Twoflower inside. The ship moves down the rails and launches over the Edge, leaving Rincewind behind. Rincewind falls off the launch page and ends up in a tree at the Rimfall, where a demon posing as Death attempts to convince him to die.